SEC rejects Hela Apparel request to defer trading suspension

Hela Apparel Holdings PLC faces a trading suspension of its shares after the Securities and Exchange Commission of Sri Lanka (SEC) rejected its request to defer the regulatory action. 

The apparel exporter informed the Colombo Stock Exchange that its March application for a deferment of the trading suspension was denied by the capital market regulator.  Trading of the company’s securities has already been suspended, effective June 18, 2026, due to a disclaimer of audit opinion in the independent auditor’s report contained in the annual report for the year ended March 31, 2025. The broader regulatory enforcement also stems from the company’s continuous non-compliance with the Colombo Stock Exchange listing rules concerning corporate governance.

In a simultaneous disclosure, the company revealed a severe breakdown in its corporate governance framework, reporting that its board of directors has been whittled down to just two members, far below the regulatory minimum requirement of five directors. 

This depletion has left key board committees, including the audit, remuneration, and related party transactions review committees, completely under-composed with only one independent non-executive director operating each. The company noted that a full reconstitution of the board and its sub-committees remains pending.

The governance crisis unfolds against a backdrop of deep financial distress for the apparel manufacturer, which has been grappling with mounting losses and eroding capital. According to the company’s interim financial statements for the nine months ended December 31, 2025, Hela Apparel suffered a massive group loss of Rs. 7.59 billion, expanding from a loss of Rs. 6.46 billion in the corresponding period of the previous year. Group revenue for the nine-month period plunged by nearly 29 percent to Rs. 43.95 billion from Rs. 61.55 billion, reflecting weakening demand and operational challenges.

The prolonged financial bleeding has severely compromised the group’s solvency position, with total equity deeply negative at Rs. 18.80 billion as of December 31, 2025, compared to a negative equity of Rs. 10.96 billion at the start of the financial year. Total liabilities escalated to Rs. 58.42 billion, driven largely by short-term borrowings of Rs. 28.18 billion, placing immense strain on the company’s cash flows and balance sheet stability. (NF)